Initiative
PRI - Principles of Responsible Investing

UNPRI ... Introducing Responsible Investment

Burgess COMMENTARY

Peter Burgess

Introducing responsible investment Co-funded by the European Commission European Commission logo

Funded by the European Commission in partnership with the International Corporate Governance Network (ICGN) and the European Federation of Financial Analysts Societies (EFFAS), the PRI has produced:

• • The Integrated Analysis report

• • A report on ESG capacity needs

• • An RI Knowledge database (currently in beta)

• • A new section on the PRI website entitled “About RI” including a series of briefing notes

ICGN has developed an ESG Professional Development Programme and EFFAS is helping with certification of the programme.

This collaborative project culminated with a roundtable held by PRI, ICGN and EFFAS at Bloomberg’s offices in London on 18 March 2013. Click here to watch the company and investor dialogue panel discuss the disclosure of ESG information by companies and integrated reporting.

The world is changing rapidly. While our market-based economy has emerged as the most efficient system for allocating scarce economic resources, it is giving rise to a growing array of social inequalities, environmental impacts and negative externalities which are affecting companies. Unprecedented environmental and social pressures driven by food, water and energy security, access to natural resources, climate change, human rights, supply chain labour standards and ageing populations have become material issues for business and the corporate world. The impact of poor corporate governance practices on shareholder value, accentuated by the global financial crisis, has also lifted issues such as transparency, corruption, board structure, shareholder rights, business ethics, risk management and executive compensation to the top of the investor agenda.

Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors, and the long-term health and stability of the market as a whole. It recognises that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems. It is driven by a growing recognition in the financial community that effective research, analysis and evaluation of ESG issues is a fundamental part of assessing the value and performance of an investment over the medium and longer term, and that this analysis should inform asset allocation, stock selection, portfolio construction, shareholder engagement and voting. Responsible investment requires investors and companies to take a wider view, acknowledging the full spectrum of risks and opportunities facing them, in order to allocate capital in a manner that is aligned with the short and long-term interests of their clients and beneficiaries.

An evolving industry

Mounting evidence of the financial materiality of ESG issues, alongside growing demands from regulators, clients and beneficiaries for more sustainable approaches to investment, are among the key drivers behind the adoption of responsible investment practices worldwide. Increasingly, investors concerned about the impact of short-termism within investment research, asset allocation, and performance monitoring recognise that integrating ESG issues into both investment analysis and stewardship practices forms part of their fiduciary duty to clients and beneficiaries and want to see their portfolios managed in a way that systematically assesses drivers of risk and return over longer timeframes.

The Briefing Notes, co-funded by the European Commission

Responsible investment is a rapidly evolving area, where core terms and concepts are changing and developing. The aims of the PRI Briefing Notes are to provide you with an introduction to some of the key terms and debates in this area, and to point you to some central references if you are interested in learning more about responsible investment. We trust that you will find them useful starting points for your research into responsible investment.

What is responsible investment?

Responsible investment and public policy

Responsible investment and fiduciary duty

Why be an active owner

Responsible investment and investment performance

Video interviews

Watch PRI signatories discuss their approach to incorporating ESG issues in their investment processes:

Erik Breen, formerly Head of Responsible Investing at Robeco, currently Manager SRI at Triodos Investment Management

Frank Curtiss, Head of Corporate Governance at RPMI Railpen Investments

Adam Kirkman, Head of ESG at AMP Capital

Craig Mackenzie, Head of Sustainability at Scottish Widows Investment Partnership

Peter Murphy, Chief Executive Officer of Christian Super

Zaiga Strautmane, Head of ESG at Unipension